Well, after a bit of debugging and information from dozens of sources... It works.
I think the main problem with the design note was that it did not re-enable RWW access after a page write or erase. Maybe this works on a m163 but not an 8.
Also, you MUST have a version of avrprog.exe that supports the mega8. 1.33 does not 1.37 DOES. I had to get 1.37 from the avrstudio4 download. Atmel should update their web page.
A tweaked version of the code is available on my projects page.
Let me know if anybody finds it helpful.